Are investment dollars returning to the market?

Small business has been overlooked in recent interest rates cuts, as the headline mortgage rate has been given preference ahead of business lending and credit cards.  The banks have previously justified this differential treatment based on different credit risk profiles; however some are starting to come around to the fact that the business owner has more say in their future income than the staff they choose to lay off in hard times.  

This is good news for Australia’s privately owned business market.

The global financial crisis, and the credit crunch that followed in its wake, have temporarily put the brakes on Australia’s largest ever transfer in business ownership.  Triggered by the baby boomers reaching retirement age, 2007 and 2008 saw the initial groundswell of businesses for sale as over 40% of Australia’s businesses change ownership between 2005 and 2015. 

Demographically this year and next were predicted to be the peak; however recent financial events have seen many potential business sellers delay their retirement plans.  A key factor in this has been that the next generation of buyers have been unable to finance the purchase of these businesses.

The banking community and private equity funds have spent the last six months taking stock and revising their lending policies while the rush to cash has ensured that there are funds available to lend to businesses. 

This money is now ready to be made available to businesses that meet the new lending criteria.  Funding the purchase of a solid business with good cashflow is within the lending criteria of most institutions.

As a result, the brakes that have been placed on the private business market have been lifted.  What remains to be seen is how quickly the market can re-establish some of its lost momentum.    

Andrew Kent is a director of BizExchange, an independent marketplace for business for sale or seeking investment. BizExchange has a directory of independent advisers and business brokers and information on valuations.

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